Audit Committee Charter

The Board of Directors (the “Board”) of Luxon Holdings, Inc. (the “Company”) has invested the Board’s Audit Committee with certain direct authority and with the authority to assist the Board in fulfilling certain of its financial oversight responsibilities. This Audit Committee Charter sets forth the purposes of the Audit Committee and the governing principles by which it is to conduct its activities.

I. Audit Committee Purposes.
The Audit Committee is appointed by the Board to assist the Board in monitoring:
A. The quality and integrity of the Company’s financial statements;
B. The independent auditor’s qualifications and independence;
C. The performance of the Company’s independent auditors;
D. The soundness and performance of the Company’s systems and internal controls regarding financial and accounting compliance, as well as the soundness and performance of the Company’s internal audit function; and
E. The Company’s compliance with legal and regulatory requirements. In addition to its regular reporting functions to the Board, the Audit Committee shall be directly responsible for:
F. The appointment, subject to stockholder ratification, if required, and the compensation, retention and oversight of the Company’s independent auditors (including resolution of any disagreements between management and the auditor regarding financial reporting);
G. The establishment of procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and
H. The preparation of the report required by the rules of the Securities and Exchange Commission (the “SEC”) to be included in the Company’s annual proxy statement.
The independent auditor shall report directly to the Audit Committee.
 
While the function of the Audit Committee is oversight, the Company’s management is responsible for the preparation, presentation and integrity of the Company’s financial statements and its overall financial reporting process. In addition, management, with the assistance of the internal auditing department, is responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The outside auditors are responsible for planning and carrying out a proper audit of the Company’s annual financial statements, reviews of the Company’s quarterly financial statements prior to the filing of each quarterly report on Form 10-Q, and other procedures that are part of their engagement.
 
In fulfilling their responsibilities hereunder, the Company recognizes that members of the Audit Committee are not full-time employees of the Company and are not, and do not represent themselves to be, accountants or auditors by profession or experts in the fields of accounting or auditing. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards; and each member of the Audit Committee shall be entitled to rely on
(1) the integrity of those professional persons and organization, both within and outside the Company, from whom or from which it receives information,
(2) the accuracy of the financial and other information provided to the Audit Committee by such persons or organizations, absent actual knowledge to the contrary (which, if it occurs, shall be promptly reported to the Board), and
(3) representations made by management as to any information technology, internal audit and other non-audit services provided to the Company by the independent auditors.

II. Audit Committee Composition.
A. The Board shall appoint the members of the Audit Committee, on the recommendation of the Company’s Governance and Nominating Committee. Members shall serve a one year term or until their successors have been appointed by the Board.
B. The Audit Committee shall consist of not less than three (3) nor more than five (5) persons, none of whom (i) shall be, or during the five prior years shall have been an officer or employee of the Company or any of its subsidiaries, or, other than in his or her capacity as a Board member or a member of any Board committee, an affiliate of the Company or any subsidiary, or (ii) shall have any other material relationship, directly or as a partner, shareholder or officer of an organization that has a relationship, with the Company or with management which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and Audit Committee member, and each of whom (iii) shall meet (x) all criteria for “independence” that may be prescribed from time to time by SEC, NYSE and tax rules, listing standards and regulations applicable to audit committees, as such rules and requirements are interpreted from time to time by the Board in the exercise of its business judgment, (y) the definition of a “non-employee director” within the meaning of Rule 16b-3 promulgated by the SEC under the Securities Exchange Act of 1934, and (z) the definition of an “outside director” within the meaning of Section 162(m)(4)(C) of the Internal Revenue Code.
C. Committee members must be financially literate, must possess a basic understanding of finance and accounting, and must be able to read and understand financial statements. The Board shall designate at least one member of the Audit Committee but may also determine that additional or all members of the Audit Committee qualify as an “audit committee financial expert,” as defined by applicable SEC and NYSE rules. The Audit Committee shall appoint a Chairperson and may appoint a Co-Chairperson.
D. Audit Committee members shall not simultaneously serve on the audit committees of more than one other US public company.
E. Members of the Audit Committee shall not receive any consulting, advisory or other compensatory fee from the Company or any subsidiary, other than in the member’s capacity as a member of the Board or any Board committee.

III. Audit Committee Meetings.
A. The Audit Committee shall meet as often as it determines to be necessary and appropriate, but not less frequently than quarterly.
B. The Audit Committee shall periodically meet with management, with internal audit personnel and with the Company’s independent auditors, in executive sessions, and may from time to time request any officer or employee of the Company or the Company’s outside counsel, other advisors or the independent auditors to attend a meeting of the Audit Committee or to meet with any members of or consultants to the Audit Committee.
C. Members of the Audit Committee may participate in any meeting by means of a conference call or similar communications equipment by means of which all persons participating in the meeting can hear and speak to each other.

IV. Audit Committee Authority and Responsibilities.
A. Audit Committee Authority.
(1) The Audit Committee shall have the ultimate authority and responsibility to appoint, evaluate, determine whether to retain and, where appropriate, replace the independent auditors, subject to stockholder ratification, if required.
(2) The Audit Committee shall be responsible for the establishment and approval of all audit engagement fees. compensation and terms, and shall pre-approve all auditing services or the method of determining additional auditing services fees not covered by the original terms of engagement, as well as all permitted non-audit services, including the fees and terms thereof, to be performed for the Company by its independent auditor (subject only to the de minimis exceptions for non-audit services described in Section I OA(i)(1)(B) of the Securities Exchange Act of 1934), which are approved by the Audit Committee prior to the completion of the audit.
(3) The Audit Committee may from time to time delegate certain authority to subcommittees consisting of one or more members when appropriate, which may include the Chairperson or Co-Chairperson of the Audit Committee, including the authority to grant pre-approvals of audit and permitted non-audit services, provided decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting and shall be noted in the minutes of the Audit Committee.
(4) The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain independent legal, accounting or other advisors to assist the Audit Committee in the discharge of its responsibilities.
(5) The Board shall provide the Audit Committee with appropriate funding, as determined or requested by the Audit Committee from time to time, for payment of compensation to any persons employed by or rendering services to the Audit Committee or to the Board, including the independent auditors.
(6) The Audit Committee shall make regular reports to the Board, which shall include an annual review of the Audit Committee’s own performance.
(7) The Audit Committee shall review and reassess the adequacy of this Audit Committee Charter annually and recommend any proposed changes to the Board for approval.
B. Audit Committee Responsibilities. The Audit Committee shall have the following duties and responsibilities, it being understood that this itemization is only by way of illustration and not by way of limitation:
(1) Financial Statement and Disclosure Matters.
(a) Review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in Management’s Discussion and Analysis, and recommend to the Board whether the audited financial statements as presented are acceptable for inclusion in the Company’s Form 10-K.
(b) Review and discuss with management and the independent auditor the Company’s quarterly financial statements prior to the filing of its Form l0-Q, including the results of the independent auditor’s review of the quarterly financial statements.
(c) Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal controls, and any special steps adopted in light of any material control deficiencies.
(d) Review and discuss quarterly reports from the independent auditors concerning:
(i) All critical accounting policies and practices.
(ii) Any alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.
(iii) Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
(e) Discuss with management the Company’s earnings press releases, including the use of “pro forma” or “adjusted” non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies. Such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made).
(f) Discuss with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements.
(g) Discuss with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies.
(h) Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
(i) Review disclosures made to the Audit Committee by the Company’s Chief Executive Officer and Chief Financial Officer during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud or possible fraud involving management or other employees who have a significant role in the Company’s internal controls.
(2) Oversight of the Company’s Relationship with the Independent Auditor.
(a) Review and evaluate the lead partner of the independent auditor team.
(b) Obtain and review a report from the independent auditor at least annually regarding
(i) The independent auditor’s internal quality-control procedures.
(ii) Any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm,
(iii) Any steps taken to deal with any such issues, and
(iv) All relationships between the independent auditor and the Company.
(c) Evaluate the qualifications, performance and independence of the independent auditor, including consideration of whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence, taking into account the opinions of management and the Company’s internal auditors. The Audit Committee shall present its conclusions periodically to the Board with respect to the independence of the auditor.
(d) Ensure the rotation of the audit partners as required by law, and consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on a regular basis.
(e) Recommend to the Board policies for the Company’s hiring of employees or former employees of the independent auditor who participated in any capacity in the Company’s audit.
(f) Discuss with the national office of the independent auditor issues on which they were consulted by the Company’s audit team and on any other matters concerning audit quality and consistency that the Audit Committee deems appropriate.
(g) Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.
(3) Oversight of the Company’s Internal Audit Function.
(a) Review the appointment and replacement of the senior internal auditing executive.
(b) Review the significant reports to management prepared by the internal auditing department, together with management’s responses.
(c) Discuss with the independent auditor and management the internal audit department responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit.
(4) Compliance Oversight.
(a) Obtain from the independent auditor assurances that Section 10A(b) of the Securities Exchange Act of 1934 has not been implicated.
(b) Obtain reports or assurances from management, the Company’s senior internal auditing executive and the independent auditor that the Company and its subsidiaries and any foreign affiliated entities are in conformity with applicable legal requirements.
(c) Review reports and disclosures of insider and affiliated party transactions.
(d) Advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations and codes of ethics.
(e) Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters.
(f) Establish procedures for the confidential, anonymous submission by employees of concerns regarding questionable business, financial, accounting or auditing matters.
(g) Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports which raise material issues regarding the Company’s financial statements or accounting policies.
(h) Discuss with the Company’s legal counsel any matters that may have a material impact on the financial statements or the Company’s compliance policies.